What made Keynes, Keynes

A few years back, a paper of mine was rejected in a prestigious heterodox journal, because it failed to grasp the importance of Keynes' sexual diaries. In fact, I had not read them (guilty as charged). My research was outdated, I was told by an angry referee (number 1, as it turns out). Not long after, I was asked to referee, for the same journal, I might add, a paper on Keynes' sexuality and its possible implications for his economic thought. The paper dealt with Keynes' sex diaries from the early twentieth century and suggested that Keynes' sexuality, together with his broader philosophical views, may help explain some of his later economic ideas. The question is interesting, not least because it has often been raised in different contexts and with very different political implications.

A decade ago or so, Niall Ferguson suggested that Keynesian profligacy was connected to Keynes' homosexuality and his alleged lack of concern for future generations. The notion that Keynes' theory was a short run one because he was childless has a long pedigree, associated to other conservative luminaries like Joseph Schumpeter. Same arguments were made by Murray Rothbard, as noted in the paper linked above. Ultimately, the argument is analytically weak, since it tries to move directly from biography to policy conclusions without establishing the relevant links.

The paper I read was sympathetic to Keynes and tried to connect his sexuality to his sensibilities about the economy as a whole, his views about “the good,” his relation to G.E. Moore’s philosophy, and eventually his views on uncertainty, money, and economic life.

Still, the broader problem remains. It is one thing to say that personal experiences, including sexuality, help shape the sensibilities of an author. That is almost certainly true, and in some sense trivial. It is another thing to claim that sexuality explains a particular set of analytical propositions. That is a much more ambitious claim, and it is far harder to sustain. In the case of Keynes, the relevance of the sex diaries for understanding the central analytical ideas of The General Theory (GT) is far from obvious.

There is no doubt that Keynes' philosophical views mattered. His early engagement with Moore, the Bloomsbury milieu, and his rejection of certain Victorian conventions all shaped his conception of life, morality, beauty, friendship, and the good society or the good life. These things may also have influenced his impatience with narrow utilitarianism and with purely mechanical views of economic behavior. But the difficult question is how one moves from those philosophical and personal sensibilities to the concrete analytical propositions that define Keynes' contribution to economics.

The question of exactly what was Keynes' main contribution to economic thought is often vaguely answered, and even within Post Keynesian groups there is considerable disagreement. If the answer is simply uncertainty, as for many in the heterodox camp, then the argument is incomplete. Keynes certainly gave increasing importance to uncertainty, especially in his 1937 response to critics of GT. Chapter 12, with its discussion of long-term expectations, conventions, and the famous beauty contest metaphor, is central to that interpretation. But Keynes’s contribution cannot be reduced to uncertainty.

Moreover, uncertainty alone does not make Keynes distinctive. Frank Knight and Friedrich Hayek also thought uncertainty was central to economic life, yet they reached very different conclusions from Keynes. G.L.S. Shackle, a student of Hayek and an important figure in some Post Keynesian interpretations of Keynes, combined elements of both Keynesian and Hayekian views. This suggests that the recognition of fundamental uncertainty can be grounded in very different theoretical frameworks and can lead to very different policy conclusions. The harder question, then, is not whether Keynes cared about uncertainty, but why uncertainty had the role it did in his broader theory of capitalism.

In my view, the central proposition of the GT is not simply uncertainty in a monetary economy, but the principle of effective demand. Keynes' main analytical break was with Say’s Law and with the idea that investment would automatically adjust to full-employment savings, even if slowly. The point of the GT, as Keynes himself made clear, was first of all a theory of employment. Autonomous spending determines income. Investment does not adjust automatically to full-employment saving. The level of activity can settle below full employment, not as a temporary deviation caused by rigidities, but as a normal outcome of a monetary production economy.

Uncertainty matters in that argument, but it is not central to the argument. It is the uncertainty about autonomous demand that matters. In fact, Keynes’s emphasis on uncertainty only became more explicit as he responded to critics and tried to explain why investment could not be treated as a simple function that smoothly adjusted to the full-employment level of saving, in part as a result of his acceptance of significant elements of marginalist economics. If uncertainty is presented as the core explanation, there is a danger of turning Keynes into an imperfectionist that believed that markets would work well enough if only expectations were less volatile and in the presence of full information. That was not Keynes’s deeper point.

His more radical proposition was that capitalism could be economically stable at less than full employment. It was precisely that economic stability below full employment that made the system politically unstable.

There is also a comparative problem. Michal Kalecki developed a version of the principle of effective demand independently, and arguably before Keynes. Kalecki's intellectual background was very different, shaped by Marx and Marxist authors rather than by Moore and Bloomsbury. This raises the question of how Kalecki's sexuality shaped his theory of effective demand. In that light, the question seems less compelling. That does not mean that biography is irrelevant. But it does suggest that the route from personal life to analytical theory is indirect, mediated by intellectual traditions, political commitments, historical circumstances, and theoretical problems internal to economics.

There is also the issue of Keynes' own intellectual development. Keynes' philosophical views were formed relatively early, if we are to believe Robert Skidelsky, and many other authors on the matter. But his economic views changed considerably over time. The Keynes of the Tract on Monetary Reform, the Treatise on Money, the Macmillan Committee, and The General Theory are not the same. If his basic philosophical and personal sensibilities were already present early on, the questions is  why did the principle of effective demand emerge only later, after the debates with the Cambridge Circus in the early 1930s. These questions cannot be answered simply by appealing to sexuality or early philosophical commitments.

A more plausible position would be that Keynes' sexuality and personal life formed part of a broader rejection of Victorian moral and social conventions. That rejection may have made him more open to questioning established economic doctrines, including the neoclassical faith in adjustment mechanisms, thrift, and the moral virtues of saving. It may also have contributed to his skepticism toward purely ascetic or efficiency-centered views of social life. Keynes did not think economics was an end in itself. He thought economic arrangements should be judged in relation to broader human purposes. In that limited sense, his philosophical and personal world mattered.

But the analytical core of Keynes' economics still has to be explained analytically. His theory of effective demand emerged from concrete debates about saving, investment, money, employment, and the failures of orthodox theory in the context of the Great Depression. His sexuality may help us understand Keynes as a person, and perhaps some of his broader sensibilities. It does not, by itself, explain the logic of the GT.

It is also a peculiar feature of the literature on Keynes' broader philosophical views to portray his motivations in a somewhat simplistic way as being apolitical. He had concerns with the good life, but not the public good. To accept the notion that Keynes was apolitical flies in the face of his extensive participation in the political process, not just as a bureaucrat, but more importantly as a direct participant in political campaigns, involved in the drafting of government program for Lloyd George in the 1929 election, for example.

Ultimately, the more interesting question is not whether sexuality caused Keynesian economics. It did not. The question is whether Keynes' position as an outsider to certain social conventions helped him imagine capitalism differently from the orthodox economists of his time. That seems plausible. Perhaps a good social scientist, a good economist, has to be more than "mathematician, historian, statesman, [and a] philosopher – in some degree," as Keynes suggested. They need to be a bit of an outsider, to see things from an alternative perspective.

Even then, what made Keynes, Keynes was not simply his personal life. It was his ability to transform a set of philosophical, political, and historical concerns into a powerful analytical critique of the self-adjusting market economy.